
For Sale By Owner (FSBO) home sales represent a small percentage of the overall housing market. According to the National Association of REALTORS ®, it’s about 6-7 percent. In the eighties, FSBO was a more popular choice among sellers, accounting for more than 20 percent of sales. Some sellers prefer the autonomy and potential commission savings of the FSBO route. However, there are pros and cons to consider regarding the choice to work independently or use a real estate professional.
Here’s a breakdown of the pros and cons of FSBO to help with the decision-making process:
Pros of FSBO
- Potential cost savings – The opportunity to save on commission fees is most attractive to sellers. The listing agent’s commission is typically 2.5-3 percent of the sale. Oftentimes, the buyer will negotiate a contract that requires the seller to pay realtor fees for the buyer, plus the closing costs. Choosing FSBO can help significantly reduce fees.
- Full ownership of the process – Having the ability to control the process is often important to sellers. The seller is in charge of determining the sales price, marketing the property, scheduling showings and negotiating without any outside input.
- Potential for a faster sale – If there’s already a buyer in mind i.e., a family member or friend, the need for realtor representation may be deemed unnecessary and the sale process can take place quicker.
Cons of FSBO
- Time – FSBO requires the seller’s time and potential funds for marketing, time spent providing showings and negotiations. In addition to the stress, handling time-consuming paperwork.
- Price challenges – Without access to full data to conduct comparative market analysis, there’s the potential to leave money on the table or to overprice the property. Studies suggest that FSBO homes tend to sell for less than those listed with a real estate professional.
- Lack of expertise – Real estate transactions involve complex contracts, disclosures and legal responsibilities. Mistakes can be costly, and not consulting with a real estate professional or an attorney could lead to significant problems in the transaction process.
Pros of working with a realtor
- Expertise and experience – Real estate professionals have access to data to help determine pricing strategies; their in-depth knowledge of the local market is often invaluable, as well as their experience with legal requirements.
- Wider market reach – With tools at their disposal, such as the MLS and other real estate sites, realtor access to data, marketing resources and a pool of buyers is unmatched.
- Guidance and professional negotiation – A real estate agent’s job is to protect their client’s best interests. They’re experienced negotiators who work to get the best deal. Enlisting a realtor to manage the process frees up the seller’s time and energy, while their guidance helps identify potential issues and facilitate a smooth closing process.
Cons of working with a realtor
- Commission – The agent’s commission is a substantial expense, typically 5-6 percent of the sale price (split between buyer’s and seller’s agents), which reduces potential profit.
- Less personal control – Compared to FSBO, there’s less personal control over the process; instead, it’s the agent’s schedule that dictates the strategy. It may not always align with the seller’s preferences.
- Agent quality and biased advice – Some real estate agents may have their own interests in mind, with the potential to provide biased advice. Also, not all realtors are equally skilled or responsive. Selecting the wrong real estate professional can impact the sales experience and outcome.
FSBO tends to work well when the seller is knowledgeable in real estate, if they have a legal background or if there’s a buyer already lined up. Using a real estate professional provides increased opportunity to increase the property’s exposure to buyers, maximize the sales price, and streamline the negotiation process.
At Landmark Title, we are fortunate to work with professional realtors dedicated to representing their client’s best interest. This provides our team with the ability to foresee challenges or roadblocks that may jeopardize a closing. With more than 40 years of industry experience, Landmark Title escrow and title officers can answer questions and help manage a secure and successful closing process. To learn more about the residential team of experts and services, get in contact here.